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Coronavirus in China may have severely stunted one of Walmart's hottest businesses

Brian Sozzi

At least prior to the coronavirus outbreak in China midway through January, Walmart’s businesses in the country were on fire.

Now that key source of growth for the world’s largest retailer could be poised to completely fall off the map in the first quarter as the country’s economic activity has come to a standstill. Walmart (WMT) — which operates 433 locations in China (407 under the Walmart banner, 26 Sam’s Club) reported Tuesday that fourth quarter (ended Jan. 31) net sales in China rose a solid 3.5%. That outpaced Walmart international’s overall sales growth rate of 2.3% and the U.S. sales gain of 1.9%. E-commerce sales in China surged 100%, way better than the U.S. growth rate of 35%.

People walk past a Walmart store in Beijing, China, Wednesday, Dec. 6, 2017. (AP Photo/Mark Schiefelbein)

Sam’s Club — continuing to benefit from Chinese consumers enjoying the fun of buying bulk goods (see Costco opening last year) — saw same-store sales increase double-digit in the quarter. That, too, was the best showing by far of any Walmart segment to cap off the year.

A Walmart spokesperson tells Yahoo Finance the company’s stores and warehouse clubs are open in the country.

But the caution on the outlook for China — which could also badly hurt a Walmart supply chain that is overly reliant on the country for items such as apparel and toys — could be felt in the retailer’s first crack at guidance for 2020 even if it says otherwise.

Walmart set 2020 earnings per share guidance in the range of $5.00 to $5.15, below Wall Street analyst estimates of $5.22. Shares fell slightly in pre-market trading.

“The company continues to monitor the events in Chile and the Coronavirus outbreak and has not included any potential financial effects in its assumptions,” the retailer said.


Walmart CFO Brett Biggs, however, said during the company’s investor day presentation the situation in China “certainly tempers” the near-term outlook in the country. Biggs added Walmart hasn’t yet seen any impact to its supply chain from the coronavirus.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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